Intel’s Otellini At The Web 2.0 Summit

By Eric Savitz

Intel (INTC) CEO Paul Otellini is being interviewed on stage this morning by John Battelle at the Web 2.0 Summit at the Palace Hotel in San Francisco. He’s apparently going to start with some demos.

Here are some tidbits from his presentation:

Demos are coming. He is focusing initially on networking at the workplace. The focus is on enterprise social networking. He is imagining a new hire in marketing named Lily. She comes to work; want to allow her to network with her colleagues; to learn about classes; to give her a network that is dynamic; use the knowledge of that network to provide context to do her job; to search for rich data in the corporation; to build professional networks. Give her collaboration tools, and integrate them into communications network manager. Also needs to be able to view classwork for learning; subscribe her to news feeds; find content on topics related to her interests. Allow her to manage her time in a personal work zone. Wikis to co-ordinate team activities, with meeting manager, which allows her to know which attendees in an event are on line. System will continually learn as she creates data. Changes the whole nature of collaboration. These tools do not exist today; he says Intel is working on some of them internally.

Otellini notes that enterprise has some of the same needs as consumer, plus security and reliability. He says it is a big opportunity, which almost no companies are addressing.

Next, he is talking about the personal Internet. People now go to find things; personal Internet turns that around, and brings relevant information to you when you need it. To run a demo, he brings out Craig the Demo Guy. It starts with mobile Internet device. He is using a camera to take a picture of a sign in Mandarin, and then have it translated into English. (They did this exact demo at CES in January.) He translates a restaurant sign. He is now demoing speech-to-speech translation with the device.

Craig the Demo Guy (think Joe the Plumber with an E.E. degree) is also showing how you can take a picture of a SKU to compare prices; or see a picture of how your K’nex toy kit will look when you finish building it.

Paul notes that there is a catch; in the demo, they are doing the computation back stage; so we aren’t quite there yet. In 2009, there will be mobile chips set the equal of the original Centrino laptop. In 2010, it will offer mobile power comparable to desktop PCs.

End of demos, on with the interview.

On the Apple iPhone: I like the iPhone; I have one; my amily has a bunch. A spectacular device, which instantly changed the paradigm of what people expect in a smartphone. It will not be unique to the iPhone. Our phones started ringing the day after the iPhone was launched. Found in PC space that competition is really good.

On the Web meets the world, like in his China example: Otellini thinks it will be done with standard tools, not a proprietary environment. Sure, iPhone approving tools, but APIs are open, and you can have it. Increasing degrees of freedom in Android, and Linux environments will be even more open. But networks will want to some testing so they can be sure they won’t screw up the phone networks.

On mobile models: Otellini says voice traffic is now almost free; voice traffic versus data traffic, you almost can’t see it on the chart. Voice is not where the money is; it is in the services. Simplest thing to do is to use the Web. Our view: bring the power and breadth of the Web to these devices, bringing the same monetary machine to it.

Otellini is talking about their business model. It starts with a hole in the model, to build chips using a technology that does not yet exist, to address markets that do not yet address. but he says the returns are very good. It took $12 billion for the company to roll out 45 nm technology; but will return $80 billion in revenue over the life of the technology. But if you miss a beat, he says, the whole thing can come crashing down. Will deploy 32 nm next year, and next two generations are proofed out in their labs, which takes them out the next 6-7 years.

What are you afraid of? (Reflecting on Andy Grove’s comment that “only the paranoid survive.”) We introduced a new product line late last year called Atom, using most advanced technology to go into low-cost devices – and netbooks. He says the margins on these processors are very good; if you want high volume, you need lower cost. The alternative was that someone else would do that. Be your own disruptor, or someone does it for you.

On cloud computing, what is Intel’s role? He says in this part of the industry, scale matters. Example is Amazon’s hosting business. Others trying to replicate scale environment. Can be difficult unless one of them stumbles badly to disrupt that.

On the economy: My sense is this is the deepest one I have seen in my lifetime. The U.S. is in a 2-3 quarter recession; as goes the U.S. so goes the rest of the world. Unemployment peaks lag GDP; likely to see much higher unemployment a year from now. But it is a big world; China GDP next year will grow 10%. They are shifting savings rate to encouraging domestic consumption; televisions, stuff they would normally sell in San Francisco.

How far is simultaneous language translation? 3-4 years, Otellini says.

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Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.